CHRISTOPHER TOOTHAKER, Associated Press |
April 17, 2008

Under a law approved this week by the National Assembly, President Hugo Chavez's government is charging a 50 percent tax on additional earnings when crude prices pass $70 per barrel in U.S. dollars and 60 percent on additional earnings when prices top $100 per barrel.

The tax, which took effect Wednesday, is based on the monthly average price of benchmark Brent crude. Revenue from the new tax could reach $9 billion annually, Oil Minister Rafael Ramirez said.

The new levy comes on top of income taxes currently set at 50 percent for foreign oil companies. The amounts paid will be deductible from the oil companies' income tax payments.

The measure expands the government's share of profits from rising oil prices in Venezuela, home to the largest petroleum deposits in the Western Hemisphere.

It also brings Chavez key funding for social programs as he steers the nation toward what he calls "21st-century socialism."

Analyst Juan Carlos Sosa, editor of the Venezuelan oil industry magazine PetroleoYV, said the measure "is going to force foreign companies to think twice about making new investments" in Venezuela, "because their opportunities to turn a profit are diminishing."

Sosa also said the government's estimates of revenue from the tax are exaggerated. Representatives of Total, Chevron, BP and Statoil in Caracas could not be immediately reached for comment on Wednesday.